CVS-Aetna merger approved despite objections from consumer advocates

Monday

Health care and consumer advocates say patients are going to be paying higher prices for medicine.

With little fanfare, a federal judge in Washington D.C. last week removed the final obstacle to CVS’s blockbuster merger with Aetna.

The $70 billion consolidation, announced in 2017, will combine the nation's third-largest health insurer with a company that owns the nation's largest pharmacy-retail chain and the second-largest pharmacy-benefit manager.

During hearings in June, lawyers for the two businesses argued that their combination would enable them to provide better, more-efficient care, while a proposed settlement with several states would answer any competitive concerns. The settlement requires Aetna to sell off its Medicare prescription drug plans.

Critics, however, argued that such vertical integration of the businesses would make an already uncompetitive marketplace even more so, forcing health costs even higher. Three pharmacy benefit managers control more than 70% of that market, 41 percent of the insurance marketplace is "moderately concentrated" to "super concentrated," while CVS alone accounts for almost a quarter of all prescription revenue in the United States.

GateHouse Media Ohio has reported on how CVS has used its position as pharmacy benefit manager for Ohio Medicaid to slash reimbursements to retail competitors and then offer to buy them out. It also prompted a state analysis showing that over a one-year period, CVS's PBM and OptumRx billed taxpayers $244 million more for Medicaid drugs than they paid the pharmacies that supplied them.

After CVS and Aetna agreed to a settlement with states objecting to the merger, it went before U.S. District Court Judge Richard Leon, who said he wasn't going to be a "rubber stamp." During days of hearings in June, the judge expressed skepticism about whether the merger would be the public benefit that its supporters proclaimed.

But by the time Leon wrote his final order last week, his concerns seemed to have been eased.

"Although (critics) raised substantial concerns that warranted serious consideration, CVS's and the government's witnesses, when combined with the existing record, persuasively support why the markets at issue are not only very competitive today, but are likely to remain so post-merger," he wrote in a memorandum. "Consequently, the harms to the public interest the (critics) raised were not sufficiently established to undermine the government's conclusion to the contrary."

The businesses lauded the ruling.

"CVS Health and Aetna have been one company since November 2018, and today’s action by the district court makes that 100 percent clear," CVS spokesman T.J. Crawford said in an email. "We remain focused on transforming the consumer health care experience in America."

Critics, however, blasted Leon's decision.

“We know from history that when health insurance and pharmaceutical benefit management markets are ruled by only a few massive companies, patients pay a steep price," Patrice Harris, president of the American Medical Association, said in a statement. "The court found our concerns ‘warranted serious consideration’ and were sufficient to hold an unprecedented judicial review that included a hearing with expert and other testimony. Regulators should now be on notice of the antitrust risks associated with the CVS/Aetna merger, and must vigilantly monitor the conduct of the merged firm to make sure that this colossal new entity does not hurt patients in the PBM services, health insurance, retail pharmacy, specialty pharmacy, and (Medicare drug plan) markets, which are already highly concentrated."

Adam Garber, a spokesman for U.S. PIRG, a network of consumer groups, said CVS "has used its market power to both increase the cost of medications for consumers and rip off the government, instead of passing on savings it promised to consumers. If their past actions are any evidence, this approved merger will leave Americans poorer and sicker. And it will likely encourage other companies to enact similar mega-mergers that will drive up prescription drug costs.”

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